Digital Revolution Act III: Is Publishing Dying?

We all know what Act One was all about and it started with a bang: on a November day like any other in 2007, the Kindle was launched by Jeff Bezos, Amazon's brilliant founder and within five hours it had sold out. The whole world of e-reading was changed forever. Years later, Bezos admitted in an interview that he was surprised at how fast the Kindle sold in its first two holiday seasons.

We all know what Act II was like, a wild, exciting ride starting with several unknown writers achieving sudden stardom: Amanda Hocking, Bella Andre, Hugh Howey . But there were many many others, often mid list authors led by Jo Konrath, re-publishing their back list and finding success. The Indie revolution was born, drawing in hordes of aspiring writers and mid-list authors alike.

Traditional publishers looked on, initially dazed. But they too caught on. They used to sell the digital version of their new titles after the hardcover and even after the paperback one and at a huge mark-up compared to indie prices, making it close to or equivalent to the cost of the paperback.

No more, they learned their lesson. Now, they put out e-books at the same time or soon after the paper version - paperbacks no longer enter into the equation. And they've brought down the price in most cases, to around $10-12 from the $18 or more of a few years ago.

The digital revolution has been good to readers, prices are down, especially for Indie books ($2.99 to $3.99 - the 99 cents craze is over, it is reserved for first books in series). But they are also down for books from major traditionally published writers.

But has the digital revolution been good for the publishing industry? Many are saying it's dying while novelists who have left behind the publishing industry are doing fine, better than ever before, as eloquently argued in a recent Business Insider article (incidentally, if you scroll down to the bottom of the page, you'll discover that Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions).

No question about it, the stigma associated with self-publishing is gone. Reportedly, "many" writers make a living from their writing alone, something that was impossible before.

So are the doomsayers wrong and everything is rosy?

No, the fact is that the future is not looking rosy at all, not for writers and not for publishers. And exactly how many writers are able to make a living from their writing alone is not known, but I shall get back to that in a minute.

First, the facts we are facingand that I want to share with you here.

Computer lab on the University of Warwick campus. (Photo credit: Wikipedia)

We are definitely into Act III of the digital revolution and the publishing industry is in for another paradigm change.

There are several reasons for that.

1. E-reader sales are not what they used to be, sales of e-books are flattening out, the industry is maturing and finding a balance between digital and paper: a lot of people prefer to read on paper and those paper addicts are not about to disappear; personally, I prefer paper for my non-fiction and for "serious" literature, whether it is Khaled Hosseini's latest novel or poetry. I'm not the only one. It seems (see article below) that students don't really like e-readers and prefer to study in "real" paper books. Who would ever have thought that millennials (and younger) were faithful to paper and shied away from e-reading?

The Kindle is great when you go on a trip or wait at the dentist's. In fact, how e-readers are used determines what sort of book will be digitally successful. And it is the sort that provides light entertainment while you wait or travel, with stories that can be interrupted at any moment, which explains why certain genres work so well in the Kindle Store (romance, thrillers) and others do not.

A warning to newbies contemplating self-publishing: if you don't write thrillers or romance (or both), your chances of success are very, very slim.

2. Digital websites cannot handle the tsunami of published books, soon some 4 million books will be in the Kindle Store alone (I recently blogged about this several times, here and here). Visibility is made to depend on sales rankings, that is the Amazon model.

The model is insidious: it feeds on itself, it only rewards who sells already, who is known on the Net for one reason or another, a celeb, a traditionally published author with a big following like Paulo Coelho, with almost 3 million followers on Twitter:

Result?

Discoverability (what an awful word!) has become a real problem for indies and traditional publishers alike. You self-publish your masterpiece and it sinks to the bottom unless you engage in aggressive marketing tactics - in this respect, if you're not afraid to jump in, indie author David Gaughran has provided an invaluable guide, Let's Get Visible: How to Get Noticed and Sell More Books, I highly recommend it.

But aggressive marketing is only a palliative and most writers can't sustain the effort, every day, every year, to promote their books, with no end in sight - and keep writing as well.

Even traditional publishers can't. They've neatly solved the problem with a clever strategy consisting in publishing only the work of celebrities and proven best-selling authors and largely letting go of all the others - whether mid-list and niche authors or newbies. Perhaps that strategy is not followed by every publisher, and small publishing houses often are more daring and will sustain a new author, but overall, there is little doubt that the publishing industry has turned more conservative than ever and more unwilling to try out new writers.

3. The average income of professional writers is decreasing dangerously. With the Internet love for free products and the (annoying) habit of not paying contributors, more and more sites do not pay or only pay a pittance.

Recently, a survey reporting on writers' income in the UK bode ill (see here): almost 2,500 working writers were surveyed – the first comprehensive
study of author earnings in the UK since 2005 – and it showed that the median income of the
professional author in 2013 was just £11,000, a drop of 29% since 2005 (data adjusted for inflation). Compare that to the minimum income standard in the UK: £16,850. Yes, much lower!

But the picture is even worse: in 2013, just 11.5% of professional authors earned their incomes solely from
writing. In 2005, 40% of them did.

In short, in the UK the vast majority of writers don't earn a decent income from their writing. It is true that the digital revolution has come late to the UK, but it has been in full swing for the past two years, at levels approaching that of the US, and surely, if it was going to be beneficial for writers, something positive change should have shown up in the statistics - instead, we get a 29% drop.

Do you believe things are different in the US? Unfortunately, we don't have comprehensive data for the US - it's anecdotal and incomplete. The closest we get are analyses like the "7 k report", interesting but not convincing. The problem is that distributors like Amazon and Barnes and Noble don’t share their e-book sales figures. Until someone does an independent, comprehensive survey, we shall never know for sure. All we know is that e-book dominance in the top 100 best-selling genre books (meaning mystery/thriller, romance, science fiction and fantasy) is "extreme", that the Big Five account for approximately a good third of everything digitally published, and that indies and small presses take the biggest slice of the cake. But when it comes to gross dollar sales, the Big Five take half the pie.

The picture changes when looking at the revenue from the author's perspective. According to that "7k report", Indie authors are earning nearly half the total author revenue from genre fiction sales on Amazon.

Great! But what is coming to the median (or average) author? In other words, how is that revenue distributed? If it goes to the top 1,000 indie authors (a likely hypothesis, given the Amazon environment that awards visibility only to the top 100 sellers), then the rest gets peanuts. And this leaves out anyone who does not write genre (and there are a lot of those too).

So, for the moment, we don't know the situation in the US but we should keep in mind that chances are it is similar to the UK, the market historically closest to the US.

4. Publishing is shedding its traditional role. Traditional publishers have even launched aggressive and highly innovative e-publishing
ventures, riding the digital wave, betting on new forms, like novellas
and serialized novels (published in separate episodes).

Byliner.com is a
good example of this phenomena. It describes itself as a "boutique publisher" who works directly with the "world's
best writers", including Margaret Atwood, Amy Tan, Jon Krakauer, Ann
Patchett, Chuck Palahniuk, Alexandra Fuller etc etc. It specializes in publishing short
pieces at a very low cost ($2.99), thus coming in direct competition with the
prices practiced by indies. This is a game-changer for indies: for an indie who is
unknown, the only way to stand out and sell is to practice super-low prices. But if big names start to compete at the lower end of the price range, there is little chance for indies to survive...

Also, some of this short fiction by "top authors" that includes so-called "best sellers" like Margaret Atwood's "Positron" (in 4 episodes, I just checked out the first) can be very disappointing. I love Margaret Atwood, but that Positron story is just not one of her best books, the premise is intriguing but soon becomes highly implausible - and no matter how professional the writing, if the story is implausible, it is finished for me.

In short, it is hard to dismiss the impression that everybody and his uncle is jumping on the e-publishing bandwagon with anything that can be read, regardless of whether it is good or bad.

Perhaps this onslaught of mediocre writing is not so surprising since there are no gatekeepers in the digital world. Amazon has instituted customer reviews but, as I have blogged several times, customer reviews are not the equivalent of a literary critic's analysis. And the digital world is rife with willing bloggers reviewing books - that's a welcome aspect of the Net and it is still evolving, some bloggers someday may achieve the status of quality gatekeepers, but that hasn't happened yet. And there are also dedicated sites, for example Kirkus that, thanks to its historic name (though it is now a different company), is able to sell reviews to Indies at surprisingly high prices - a mere paragraph of review for some $400. For many indies, that's a serious investment.

But all this does not amount to serious gate-keeping. If I insist on this gate-keeping argument, it's because it's the only way to crack the visibility problem. Probably Amazon is best placed on the Net to pull it off, if only it would set its mind to do it.

Amazon already has a select group of reviewers in the Vine Program reviewing every sort of product on sale. All it has to do is pick out those who like to review books and do it best. The next step is to set up some guidelines for review, so that the work is done professionally, covering systematically all major aspects from characters to plot development and the writer's "voice" etc. And finally, tweak the book page layout so that vine reviews receive pride of place compared to customer reviews.

But for the time being, there is no "gate-keeping" on the Net. Thus chances for a good book to rise to the surface and become visible are wholly dependent on luck. What this system does for our culture overall, I don't like to think.

How is Act III going to play out? What does the future hold?

In this dismal setting, as we all know, a fight has recently developed between two giant players: Amazon, the biggest e-book distributor (and incidentally a publisher in its own right) and Hachette, one of the Big Five Publishers.

It's an epic fight, though Amazon, in some ways, is a Goliath compared to Hachette: its book business is a small part of the company that sells everything like an online Walmart while for Hachette it is the whole company. So expect Amazon to be more resilient than Hachette and able to last longer in this protracted fight. We're headed now for the last quarter of the year, the holidays book sale season is looming up but the fight, started some six months ago, is not over.

Nobody really knows what the fight is about. It would appear, from what one reads in the press and in the various letters exchanged between the concerned parties, from Authors United to the message from the Amazon Team (termed Readers United), that Amazon is trying to convince Hachette that by lowering its prices it would achieve more sales. Authors whose sales got hurt hope they can move the Amazon board of directors, and maybe they can. Amazon's reputation could get hurt. As the New Yorker noted, "The signatories of the Authors United letter include some of the
best-selling writers in the world (Elizabeth Gilbert, John Grisham,
Stephen King) and some of the most celebrated (Robert A. Caro, Michael
Chabon, Edwidge Danticat)."

Still, on the face of it, Amazon's argument makes sense. Indies have sold plenty of books and survived thanks to low prices...and Amazon's generosity, allowing them a royalty rate several times what traditional publishers give their authors.

On the Kindle, no doubt about it, the evidence is in: low prices sell books. Price elasticity is not a mirage but a reality.

It is Amazon's model vs. the traditional publisher's model.

But is that what they are really fighting about? I suspect something else is afoot though I have nothing to prove it, nothing except economic logic. Starting in 2007, Amazon generously gave out 70% royalty rates to anyone (indie or publisher) who uploaded their books in the Kindle Store provided the prices were set between $2.99 and $9.99. Why this sudden generosity? Because when Amazon launched the Kindle, the store needed to be filled up with books. The goal was to create a low-price environment that was enticing to readers.

That is Amazon's preferred price range and one that Hachette is not accepting.

But what if the problem between Amazon and Hachette had little to do with the price level but a lot with the 70% royalty rate? Amazon needs to show a profit, Wall Street has recently grown impatient with Amazon's strategy of taking no profit because of its price-cutting aimed at gaining market shares. At 70% (which means Amazon takes in only 30%) it is probably not making money. As a book distributor, its share is at a historical low for the industry. I am guessing that for Amazon a better rate would be 50%. And to make it work for both sides, for Amazon and Hachette, book prices need to come down so that greater volumes are sold, and in the end, more money is raked in for both.

Amazon has argued persuasively that books do not compete against other books in today's entertainment world: they compete with TV series, video-games, movies. So books to compete in that environment need to be priced like a cup of coffee.

I'm afraid Amazon is right in this and that in the end, it will win out. Hachette won't lose if it lowers its prices: all of a sudden, its prized authors will sell at prices so low that no indie can resist - unless, the indie is one with a big following before she ever attempted self-publishing, or an indie that has made a name for herself over the past three years. Anyone who hasn't "made" it by now, cannot expect to make it in future, unless, by a quirk of fate, she manages to stay high in the Amazon sales rankings, keeping her book visible.

I know, this is a depressing analysis for indies. And, like Queen Victoria, I am not amused. But I prefer to face reality than to continue and pretend like Voltaire's Candide, that "all is well in the best of worlds".

Promotional poster for the series premiere .

With the rise of TV series and video games, fewer and fewer people are reading for entertainment. Publishing, if it is to survive, needs to adjust. And in some perverse ways, it already is.

Consider Lena Dunham's success as creator and actress in "Girls", a universally acclaimed TV series that started in 2012, as an HBO show. I just read in the New York Times that she is coming out with her own book based on the series. As the NYT says,

"Why would someone working in high-end cable TV, which is arguably
today’s most vital entertainment medium, extend her reach into one
that’s ostensibly dying?"

"Ostensibly dying?" Ouch, that hurts (especially if like me, you love books and are fascinated by publishing).

But it's a good question, why indeed? After all, in the past, the traditional career path was the other way around: you wrote a book, you ended in Hollywood if you were lucky. As noted in the NYT, "After all, the trajectory of female essayists and cultural critics (see
Ephron, Joan Didion, even Dorothy Parker) has traditionally been to
parlay their literary bona fides into more lucrative work in Hollywood.
Dunham, though she will continue to make television and films, has done
things in reverse."

I don't know why she has done "things in reverse", but I take it as a sign of the times. Publishing has become a niche activity in the broader entertainment world, a cultural thing, a little extra you give to yourself, a pat on the back after you've succeeded at everything else that matters... And she's only twenty six. Congrats, Lena!

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